Alaska Airlines To Be 'Very Deliberate' As It Combines With Virgin America
Alaska Airlines management and workers received a lively, upbeat welcome on their rival’s home turf Wednesday when they flew to San Francisco to celebrate a merger closing. Alaska Air paid $2.6 billion to buy upstart Virgin America.
Now comes the hard work of integration.
But first there was a party. In keeping with Virgin America’s unconventional style, there was pulsing music. Bacon covered donuts were served. Flight attendants in high heels waved pom-poms as the passengers from Seattle deplaned.
It falls to Alaska Airlines President Ben Minicucci -- who is also the newly installed CEO of the Virgin America subsidiary -- and his team to pull off what his boss pledged Wednesday would “go down as one of the best mergers ever.”
Minicucci said the two toughest areas could be unifying the IT systems and corporate cultures.
“We’re going to spend a lot of time getting close to the Virgin America employees and make sure that we actually nail this culture right,” he said.
Combining massive computer systems has been an Achilles heel for other airline mergers.
“So we’re being very, very deliberate in how we integrate those,” Minicucci said.
Alaska Airlines workers who rode a charter flight to their former rival’s home base were uniformly positive about the merger’s expected benefits.
Jan Keller of Seattle was curious how the distinctive brands will meld. Alaska is known for hospitality and punctuality and Virgin for style, hipness and fancier cabin amenities.
“I think that they can bring us into the ‘cool’ range a little bit more than maybe we are,” Keller said. “I’m excited to see where we could go with that. I think it’s going to be a really good thing.”
Virgin America workers were more reticent about their hopes and fears. They’ll be absorbed by Alaska’s larger unions, but probably will see better pay and work rules.
Virgin Copilot Tony Doran stopped to see what the commotion in the terminal was about and said he’s on board.
“I’m excited to see the long term potential,” he said. “I see a lot of longevity I think with the stability of two companies merging.”
The combined airline will be overseen by Alaska Airlines management from their headquarters near Seattle. It’s mostly business as usual for customers in the near term because of the cautious pace forward.
Alaska CEO Brad Tilden said about 300 management jobs at Virgin America headquarters in San Francisco will become redundant over the next year and be chopped. But he reassured the rest of the staff at the acquired carrier that plans for growth and expansion focused in California will make their jobs secure.
Virgin America currently has 3,200 employees. Older, larger and more profitable Alaska Airlines employs 15,600 including workers at its Horizon Air regional airline.
During a news conference Wednesday at San Francisco International Airport to discuss the merger closing, Alaska’s top brass were coy about how long they would operate Virgin America and Alaska Airlines as separate brands.
Bond rating agencies are not happy about the uncertainty or the debt that parent company Alaska Air Group took on to finance its all-cash acquisition of Virgin America. This week S&P Global Ratings downgraded Alaska Air’s corporate credit rating from BBB- to BB+, which mean the airline’s credit quality has slipped from investment grade to junk status.